Corporate Profits Are Up 4X and Their Taxes Have Fallen by 50%
-- Meanwhile the Workers' Payroll Tax Has Doubled
Corporations have decided to let middle-class workers pay for
national investments that have largely benefited businesses over
the years.

By Paul Buchheit

May 17, 2013
"Information
Clearing House" -
Ayn Rand's novel "Atlas Shrugged" fantasizes a world in which
anti-government citizens reject taxes and regulations, and "stop
the motor" by withdrawing themselves from the system of
production. In a perverse twist on the writer's theme the
prediction is coming true. But instead of productive people
rejecting taxes, rejected taxes are shutting down productive
people.

Perhaps
Ayn Rand never anticipated the impact of unregulated greed on a
productive middle class. Perhaps she never understood the
fairness of tax money for public research and infrastructure and
security, all of which have contributed to the success of big
business. She must have known about the inequality of the
pre-Depression years. But she couldn't have foreseen the
concurrent rise in technology and globalization that allowed
inequality to surge again, more quickly, in a manner that
threatens to put the greediest offenders out of our reach.

Ayn Rand's
philosophy suggests that average working people are 'takers.' In
reality, those in the best position to make money take all they
can get, with no scruples about their working class victims,
because taking, in the minds of the rich, serves as a
model for success. The strategy involves tax avoidance, in
numerous forms.

Corporations Stopped Paying

In the
past
twenty years, corporate profits have quadrupled while
the corporate tax percent has dropped by half. The
payroll tax, paid by workers, has doubled.

In effect,
corporations have decided to let middle-class workers pay for
national investments that have largely benefited businesses over
the years. The greater part of basic research,
especially for technology and health care, has been
conducted with government money. Even today
60% of university research is government-supported.
Corporations
use highways and shipping lanes and airports to ship their
products, the FAA and TSA and Coast Guard and Department of
Transportation to safeguard them, a nationwide energy grid to
power their factories, and communications towers and satellites
to conduct online business.

Yet as
corporate profits surge and taxes plummet, our infrastructure is
deteriorating. The
American Society of Civil Engineers estimates that $3.63
trillion is needed over the next seven years to make the
necessary repairs.

Turning Taxes Into Thin Air

Corporations have used numerous and creative means to avoid
their tax responsibilities. They have about a year's worth of
profits
stashed untaxed overseas. According to the
Wall Street Journal, about 60% of their cash is
offshore. Yet these corporate 'persons' enjoy a foreign earned
income
exclusion that real U.S. persons don't get.

Corporate
tax haven ploys are legendary, with almost 19,000 companies
claiming home office space in one
building in the low-tax Cayman Islands. But they don't want
to give up their U.S. benefits. Tech companies in 19 tax haven
jurisdictions received
$18.7 billion in 2011 federal contracts. A lot of smaller
companies are legally exempt from taxes. As of 2008, according
to IRS data, fully 69% of U.S. corporations were organized as
nontaxablebusinesses.

In keeping
with Ayn Rand's assurance that "Money is the barometer of a
society's virtue," the super-rich are relentless in their quest
to make more money by eliminating taxes. Instead of calling
their income 'income,' they call it
"carried interest" or "performance-based
earnings" or "deferred
pay." And when they cash in their stock options, they might
look up last year's lowest price, write that in as a
purchase date, cash in the concocted profits, and take
advantage of the lower capital gains tax rate.

So
Who Has To Pay?

Middle-class families.
The $2 trillion in tax losses from underpayments, expenditures,
and tax havens costs every middle-class family about $20,000 in
community benefits, including health care and education and food
and housing.

Schoolkids,
too. A study of 265 large companies by
Citizens for Tax Justice (CTJ) determined that about $14
billion per year in state income taxes was unpaid over three
years. That's approximately equal to the loss of 2012-13
education funding due to budget cuts.

And the
lowest-income taxpayers make up the
difference, based on new
data that shows that the Earned Income Tax Credit is the
single biggest compliance problem cited by the IRS. The average
sentence for cheating with secret offshore financial accounts,
according to the
Wall Street Journal, is about half as long as in some other
types of tax cases.

Atlas Can't Be Found Among the Rich

Only 3
percent of the CEOs, upper management, and financial
professionals were
entrepreneurs in 2005, even though they made up about 60
percent of the richest .1% of Americans. A recent
study found that less than 1 percent of all entrepreneurs
came from very rich or very poor backgrounds. Job creators come
from the middle class.

So if the
super-rich are not holding the world on their shoulders, what do
they do with their money? According to both
Marketwatch and economist
Edward Wolff, over 90 percent of the assets owned by
millionaires are held in a combination of low-risk investments
(bonds and cash), personal business accounts, the stock market,
and real estate.

Ayn Rand's
hero
John Galt said, "We are on strike against those who believe
that one man must exist for the sake of another." In his world,
Atlas has it easy, with only himself to think about.

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